Energy Performance Contracts
Total savings of 32,100 MWh
Establishing markets for the uptake of guaranteed energy services in the form of energy performance contracts
- Establishing markets for the uptake of guaranteed energy services in the form of energy performance contracts (EPC) in 9 European regions by using street lighting refurbishment as a learning and testing ground, fostered by the provision of regional EPC facilitation services.
- Implementing of 36 EPC projects in the field of lighting refurbishment by the city partners of the project and other municipalities associated to the project (real-life procurement).
- Achieving direct total savings of 32,100 MWh through these projects: By using energy efficient technology, energy savings of at least 50% compared to "standard" technology solutions will be achieved.
- Inducing 18 SMEs in becoming ESCOs: with the support by regional EPC facilitation services, 2 new ESCOs in each region will be established.
The work programme aims at an increased market uptake of guaranteed energy services through raising knowledge, transparency and trust and by providing support to concrete projects. It consists of the following main actions:
- Internal capacity building and setting up regional ESCO facilitating services.
- Provision of regional EPC facilitation services.
- Financing EPC projects.
- Supporting and implementing real-life procurements of EPC street lighting projects.
- Applying the knowledge to other EPC applications.
- European dissemination and networking.
The core of the action will be EPC facilitation services (supporting both the demand and the supply of EPC services) as well as the EPC projects implemented by the partner cities. In each region, there is a regional co-ordinator which assumes responsibility of the overall project implementation in the region as well as a city/county partner. Energy efficiency improvement measures, such as street lighting refurbishment with LEDs, often require significant upfront investments. This is a major barrier for most municipalities in Europe. In many cases, EPC can offer a solution to overcome this obstacle. EPC works best where technologies with short payback times are available. Energy Performance Contracting is a contractual arrangement between a client (e.g. a municipality) and a service provider, a so-called "Energy Service Company" (ESCO). Typically, the ESCO finances and implements energy efficiency investments, for example the refurbishment of a street lighting system to LED technology. The ESCO guarantees the energy savings in the EPC contract.
The annual cost savings are then used to cover the investment and capital costs. After the end of the contract, the client benefits from energy and cost savings. The EPC model can take many forms, making it adaptable to a variety of specific country contexts. Core elements that distinguish EPC from other types of financing schemes are contractually guaranteed energy savings and consequences for the ESCO if these are not achieved. Street lighting is an important contributor to traffic and public safety. However, assuring good visibility during hours of darkness also requires a substantial amount of electricity and money. For municipalities with older, inefficient systems, street lighting can account for 30-50 % of their total electricity consumption.
TECHNICAL & FINANCIAL DETAILS
Energy Performance Contracting (EPC)
KEY SUCCESS FACTORS (REPLICATION POTENTIAL)
- Good technical project preparation is key. The right approach in project preparation is key for the success of the project: It is crucial to have a meaningful and accurate inventory of the existing street lighting system as well as a good-quality, well-standardized audit to determine reliable numbers on saving potentials. The partners and the advised cities realized that they had underestimated the resources needed for technical and engineering aspects.
- EPC: high interest, low knowledge. The high number and the quality of participants at the project events as well as the active use of the facilitation service showed that many stakeholders are very interested in the instrument. However, wide-ranging knowledge gaps on technical and economic aspects exist. Also, there are many prejudices that need to be proactively overcome by a trusted information source. Otherwise, they will continue to block decisions in favour of EPC.
- LED: offers choice, but require knowing your needs. LED solutions are showing to be proven technologies that are suitable for very small and very large projects and permit high energy savings at high lighting comfort. However, due to their wide-ranging possibilities and the fact that street lighting directly affects citizens and the local business community, it is important to understand the needs and priorities in each municipality to determine the optimal solution for different locations.